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tv   Squawk Box  CNBC  July 19, 2019 6:00am-9:00am EDT

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we have double digit temperatures today headed higher tomorrow and sunday. "squawk box" begins right now. ♪ live from new york where business never sleeps, this is "squawk box. good morning welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen andrew is off today. let's look at the u.s. equity futures. as joe was mentioning, there's all these hopes out there that maybe you'll see a bigger move from the fed, a bigger cut than anticipated based on those comments from new york federal reserve president john williams yesterday. you see the futures picking up this morning after ending in positive territory yesterday right now the dow futures up by 58 points. s&p up by 3.
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nasdaq up by 33. however the new york fed, bullard as you mentioned and others are pushing back on this idea that a bigger cut will be coming the new york fed itself putting out headlines saying that speech was not about potential policy actions at the upcoming fomc meeting, this was based on academic research done by john williams i don't ever recall hearing the fed walking back what somebody was out there saying a lot of fed presidents have spoken to us over the last 10, 12 years at this point pushing become a bit on that. let's look at what happened overnight in asia. you will see the nikkei was up by 2%. big swing back for it. hang seng was up by 1% the shanghai up by 0.8%. again, the nikkei reversing course after the weakness we had seen the day before. european equities this morning, you will be seeing green arrows there. the dax is up by 0.3%. the cac and ftse up by 0.2%.
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italy and spain weaker italy down by 0.9% look at the treasury market. right now on this friday we're heading into the weekend with ten-year at this point yielding 2.043% >> when i'm over there, i can't see you guys when i go home and i do it, sometimes i go to the top of the show, if it's recorded i watch. i see you two guys talking >> but it's so awkward to be on camera sitting here. >> but you guys are talking. >> do you know -- >> i don't blame you for that there's times when he's over there, then i watch later on in the show, i'm not over here listening, but we're right here. i don't blame you. >> i can listen and talk at the same time. >> i know you can. i can't. what did you say all right. let's -- i can't ta talk about boeing it's the story that keeps on giving boeing will take a 4$4.9 billion after-tax charge related to the grounding of the 737 max
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the company is bracing for potential payments over several years to airlines for delayed deliveries and disruptions to schedules. those carriers include american, united and southwest who have canceled thousands of flights since the max was grounded in march following two deadly crashes boeing says the charge will cut its pretax profit and revenue by $5.6 billion that's a big hit it will produce the largest quarterly loss i boeing's history when it reports results next week. the charge only focuses on the impact of the grounding and does not include estimates of boeing's financial liability from the crashes boeing acknowledging mounting costs will make the 737 max less profitable the estimated cost to produce the plane will be $1.7 billion in this quarter. boeing expects the max to be recertifiedulators and return to service by the fourth
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quarter. with all that said, boeing is solely responsible for the gain in the dow >> i guess because there's a number on it now >> there's a number. such a big company when it's a one-time item, we saw the financials it's facebook, $5 billion that's like a rounding error >> right there's already so much negative sentibili sentiment in the stock as you said, the airlines are not anticipating this will be back in service in the fourth quarter. and the new york fed is walking back comments from john williams the comments in question were part of a speech given at the annual meeting of the central bank research association. williams said it is better to take preventive measures than to wait for disaster to unfold.
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then came this, a spokesman for the new york fed walked back the comments calling it an academic speech based on 20 years of research and said it was not about potential policy actions at the upcoming fomc meeting unusual to see this. williams as head of the new york fed has a powerful position. easier to say some of these things when you're the san francisco fed president, but as the new york fed president, that position holds a lot of weight people listen to him maybe the third person at the fed thinking this means something. >> that response made no sense to me. you know, we do these studies to try to anticipate real-world events but once we found this out, it doesn't mean anything for what we might actually do >> right >> it seems to indicate strongly
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that acting early would be the proper move. it's 20years of academic research but it was just an academic paper. why do they have to say that it's like saying you didn't really hear what you just heard. it's what williams thinks but may not be what -- >> why do the -- >> it's not what they want with the market reaction. the fed already has so much pressure on them from the market anticipating a rate cut, and now the odds are we have given a 50 basis point cut. >> my initial reaction was great. more academic research liesman type stuff that will help so i was thinking, usually academic research in the real world is useless then i was thinking why -- you come to that conclusion, it's strongly indicating that, now you'll ignore it >> no. i think it's what you first said, they're trying to walk back market expectations i bet it's exactly what john
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williams thinks and how he will vote. boston fed president eric rosengren will be on "closing bell" today at 4:30 p.m. eastern, that's a cnbc exclusive interview. other stocks to watch, carl icahn has filed a proxy statement seeking to replace four board members at occidental patrol yum petroleum skechers surging today as second quarter results topped forecasts. the company saw big sales gains in india, china, mexico, the middle east, and strong demand for its women's, men's, sports and street wear lines. coming up, want to hit this up and see what the market cap is microsoft -- >> it's the largest. >> headed for 1.1 with the "t.
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i hope in my lifetime i see it begin with a q, quadrillion. >> that will be a long time. >> maybe if you live to a really, really old age >> microsoft shares hitting new highs. we'll break down the company's report next. and then blackrock's ceo larry fink will join us to talk about the quarterly numbers, the markets and a lot more remember, he got some grief for saying i expect a melt-up before a meltdown at 7:00 a.m., we'll be joined by marc lasry who owns the milwaukee bucks, and baseball superstar alex rodriguez, who has so much money and -- >> a big investor in real estate >> loaded. >> has some interesting things in his personal life, too. married to j.lo. we'll get -- >> on his way.
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>> all right they're engaged. any way, it's kind of hoping that she stops by to watch the show i wouldn't count on that any way, we'll get the thoughts on the sports business before we head to break, a look at the biggest winners and losers in the dow. this is the couple who wanted to get away
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microsoft cloud growth has increased. they have bundled office and other products with their cloud services here to break down the numbers is our next guest. is there anything you saw that was not anticipated in the work you had done leading up to the release? >> we thought last week when the pc shipment data had come out that the oem numbers were
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stronger than we thought that outperformed, but we saw another strong quarter of cloud growth azure outperformed, office 365 outperformed total cloud revenues exceeded the forecast by a half billion the intelligent cloud business for the quarter was the largest by revenue and for income. though not for the year. we would expect the azure momentum to continue strongly. >> we hear ibm trying to bolster its cloud business sometimes we attribute weakness in the results to not being quite as successful. is microsoft a zero-sum game is microsoft's gain ibm's loss >> there's competition >> who else? >> this is a growing market. this is a new phenomenon i've been following tech for over three decades now, this is
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a fascinating thing to observe not only the broad market growth but microsoft's recovery in the last few years >> we were talking about that before >> so of course ibm can't win every contract microsoft can't win every contract clearly they have been the largest for two years in total cloud revenue. very strong margin expansion the strategy overall and for cloud is working in terms of hybrid computing, addressing specific end markets the strategy, the technology, the investments they made are clearly working. >> i was blown away. they had double digit earnings growth for nine quarters consecutively. with more to come. >> with more to come what happened? what did satya do? >> we've talked about this i think it's the focus on where the growth was going to be
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it's the scaling of the cloud business you will get margin expansion there. there's been remarkable resiliency in older business something we typically wouldn't have seen, but we've seen the older service offer businesses and continue to do well and strongly outperformed our expectation for the quarter. that's a profitable business so it's all the pieces coming together, but particularly for new growth areas >> so the -- you see azure growth of 64%. you wonder how long that can continue especially when it was 89% a year earlier, and last quarter it was 73% it's still such a staggering number does that stay above 50% >> for the time being. at least the next number of quarters when you think about it in absolute terms, we think by fiscal 2021, the azure revenues
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could be bigger than the entire cloud revenues of '18. and not be far behind the office 365 business, which to date has been larger. i expect this to be a much, much larger business with total cloud revenues clearly continuing to grow with improving margins. >> so 2014, satya has been there for five yeersars. how do we look at the previous tenure of balmer? was it spring-loaded or was it -- i don't remember watershed moments in social media. >> he picked satya >> was it spring-loaded for this or -- >> it shows two things one that management does matter. >> balmer gets an "a" or a "b" plus what does he get >> without giving him a letter grade, he set the stage.
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we talked about this clearly the pieces were there. management's focused the company. they killed off the phone business the nokia acquisition, they killed that off. that was correct >> which is still amazing that he sought to do that >> sure. it was a decisive thing to do. the investment in sales and r & d and focusing in on the right areas, reorganizing the company in certain ways, as we see now with the reporting segments, those are all the right things to do. and identifying and adhering to a very well articulated strategy since satya became ceo, there's been a phrase that i've liked that they've used. they call it ubiquitous computing and ambient intelligence which means commuting everywhere hyper scale, multi scale they have almost unique capabilities in doing that
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>> if you put any type of -- if you think the stock will grow at a reasonable percentage per year, this will be a $2 trillio company -- >> maybe the next boeing tomorrow is the seventh anniversary of our wreck menning the stock. >> way to go so -- >> you still like it, even though so much of it is baked inned with the markein with the market >> there's still more to go. we raised our price target two weeks ago to 150 >> blackrock out with earnings it looks like the company came in with earnings of $6.41 a share versus the $6.50 the street was expecting revenue shy of estimates at 3$35 billion. the firm says the decrease in revenue comes from lor s fros fd fees, lower performance fees blackrock's assets under management were 6$6.8 trillion versus the 6$6.3 trillion
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reported the quarter before. also the earnings per share, they say the year over year earnings per share decrease and comes from a lower operating income number and a higher effective tax rate that was partially offset by a lower die lawsuluted share coun. we will talk with larry fink in a few minutes to talk about the earnings, talk about china, where the company is investing more than $6 trillion and just where he sees the markets now especially after those comments from john williams yesterday. up next, ipo rush. we have an update on one of the most anticipated ipos for the second half of the year and the first earnings report from an ipo last month "squawk box" will be right back.
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welcome back we're learning much more about the wework ipo reuters is saying they will host an analyst day on july 31st. this comes as the "wall street journal" reports wework's co-founder and ceo, adam newman cashed out of more than $700 million in the company
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that was through a mix of stock sales and debt typically start-up founders wait for an ipo to monetize holdings. newman reportedly sold some of his stake in the company over the past couple of years newman has been criticized for personally investing in commercial properties that he then turned around and leased to the companies. the company said he plans to transfer those property holdings to a fund occupied by wework usually a founder waits for an ipo and then they're locked up and can't sell for a long time >> if you wanted a great ipo to invest -- our on a dog and pony
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show trying to make everybody feel great >> i sold everything >> so front and center weird. coming up, good news for everyone who has been stuck in a middle seat on a plane a new design will make the middle slightly less awful >> that sounds like a lot less awful. coming home, that's why i wasn't here on monday i was delayed for hours. >> who did you put in the middle >> caylee. >> matt had to sit on the other side i had to sit with caylee, my mom on one side, me and caylee matt was stuck in the middle seat with kyle because they split us up because we were on a flight we weren't supposed to be on >> he's much thinner he has that going for him. >> he dealt with it. >> he lost a lot of weight >> looking good. >> he could fit in there and -- >> he's tall he has knees >> yeah. >> good luck with that. we're minutes away from our big interview with blackrock's ceo larry fink before we go to break, here's a
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♪ welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning equity futures, u.s. equity futures are up a bit earlier up 44 points on the dow. the s&p is indicated up 2. the nasdaq fairly strong, up about 30 we should point out boeing accounts for a large part of th gain in the dow jones. some figures released on what it will cost them, all the circumstances surrounding the 737 max. that stock earlier up 6, 7
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points forget about jockeying for the aisle seat airlines may finally have a solution to making the middle seat more comfortable. the faa approved a new staggered seat design. middle seat passengers sit slightly behind the others, and the middle seat will be three inches wider than the window and aisle seats. there's a two-level armrest that ends the elbow fights, and aisle and window passengers use the front elevated part of the armrest, the middle seat passenger uses at lower armrest. this is such a great idea. why did it take somebody so long to figure this out >> normally they never have interest in -- >> passenger comfort >> all i remember them doing is taking inches away from the seats for the last 20 years. >> a lot of the planes have the
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front section that there's might be 35, 40 seats that are vertical they figured out how to get these a lot of them in that area those pods are amazing if you can somehow find a way to one. >> i came from a cross-country trip, we were in the back row. we were put all over the place >> that's tough. >> i'm telling you, thank you finally for thinking about giving more space to passengers. >> it's difficult to upgrade they're much more profitable the airlines now that means that they try to save as many of those seats, they try to get revenue for the first class. you don't get as much revenue from upgrade >> and load capacity is like 89%. >> they try to get people to pay up for an eblxpensive first clas seat >> yeah, you mooch >> i'm glad they're doing well, i guess. >> we are. thank you for additional space.
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when we come back, blackrock reporting earlier this morning we'll have blackrock's ceo larry fink he will join us on set in a moment the stock up by 1.86 stick around, you're watching "squawk box" on cnbc dear tech, let's talk. you blaze trails... but you have the power to do so much more. let's not just develop apps, let's develop apps that help save lives. let's make open source software the standard. let's create new plastics that are highly recyclable. it's going to take input from everyone. so let's do it all, together. ♪ ♪ let's expect more from technology. let's put smart to work. ♪ ♪ [what about him? let's do it. [ sniffing ]
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welcome back blackrock results out this morning. the world's largest asset manager posting a 6.5% drop in quarterly profit among the reasons its investment and advisory revenue fell, costs rose and taxes were up joining us is blackrock's ceo larry fink thanks for coming in >> hi, becky, hi, joe. >> you laid out in the release what happened. there was a 3% decrease in earnings per share year over year, lower operating income and higher taxes, that were far initially offset by what >> we had 1$151 billion of inflows, of which $87 billion was institutional, and $73 billion was active >> 6$6.8 trillion with a "t" assets under management. >> year to date, assets are up
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6$688 billion >> why >> markets are higher especially in the united states versus elsewhere. one key thing about the quarter, the average assets for the quarter were 2$200 billion lower because of the market swoon in may. one of the more interesting points, ten years ago when we bought bgi, about 49% of our business was in the u.s. one would have thought ten years later as the world got healthier, bigger, broader, you would have thought that would have shifted downward a bit. and right now it's about 66% u.s. >> wow >> so that just tells you how much market beta has been in the united states versus the emerging world in the second quarter we saw that very large because we
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had -- emerging markets were down 7% for the quarter, yet s&p was up approximately 7%. so we had a lot of die vevergen beta we had $26 billion increase of cash we saw people de-risking i still believe that this will be a mistake, people are underinvested in equities. and i do believe with now the changes of the tone of central bank behavior and you're starting to see corporate earnings coming in well, you know, we still are constructive on the world we had great active flows. we had active flows in equities in the second quarter, which was unusual. we raised 1$1.6 billion >> you could never be a sell side analyst because you said something you were on last time. you took a position and i mentioned it earlier >> right >> i bet you got some flack,
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too. the headline was larry fink predicting a melt up not a meltdown so many people are sure that this is all artificially fed-induced gains, and that the fundamentals don't much up with the equities for you to say that you put yourself out on a limb and stuck your neck out. a sell side analyst would be, oh, might go up, might go down they never say anything. i thought you probably got some flack for that but you were right now you're saying it again >> yes >> which is significant, even at these levels >> at these levels >> you think there could still be trending higher -- >> markets will trend higher i believe if you want to frame where the market will be for the next ten years i would be betting on the rest of the world will catch up somewhat to the u.s. when you see the big shifts so much of the market gains have been u.s., for good reason >> we deserve it
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>> we deserve it we have better companies we deserve it. also because we did more fiscal policy than other countries. other countries were heavily reliant on just monetary policy. i think that's the issue i know that we're all anticipating a change at the ecb. i hope christine lagarde pushes some of the governments to start focusing on more fiscal policy >> is it definitely her? >> i hope it is her. i think it's probably highly likely >> i'm not optimistic about her. some of her comments in the past were, i don't know -- >> she's -- >> she's like elitist, globalist. just -- i know >> i'm globalist, too. >> but you appreciate the fiscal work we've done in this country. i don't think you're talking about it as stimulus just throwing money at something. you're talking about deregulation, even tax reform and all these things
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that's what you mean by fiscal, right? >> i also believe fiscal policy is a better tool for more -- >> what kind of fiscal policy? infrastructure >> let me finish fiscal policy does more for an economy than monetary policy monetary policy has limited tools, it monetizes financial assets -- >> what do you mean by fiscal policy >> let me just finish. >> okay. >> i need to know. >> i'm trying to help you. >> i know. it's hard. >> monetary policy monetizes financial assets bonds and stocks the general population does not own bonds and stocks especially in europe and asia. this is one of the structural issues 82% of savings in europe is in a bank account china, almost all savings is in a bank account when you stimulate the economy through monetary policy, it's not impacting the majority of people so fiscal policy through a tax reduction, some time type of
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redistribution of infrastructure by creating jobs that way, that will lift more people in the economy. i think this is one of the structural issues we'll have to live with. i think this is why europe has not been able to get out of its problems it's been way too reliant on monetary policy. when 82% of savings is in a bank, they have negative return now. do you think that will stimulate more consumption >> we have not done infrastructure here. so the fiscal policy -- >> we're not going to any time soon >> the ones that paid off were the former of what you talked about, tax reductions and things >> right >> that is one of the reasons why income inequality here has gotten worse over the past 10, 15 years -- there are 401(k)s here some people participate. >> what is our savings if europe is 82%, china is
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everything -- >> 82% of all their savings is in a bank account. we have much more -- europe does have pension funds that are much more state run we have a much stronger and better equity culture in america. that's why u.s. stocks trade at higher pes this means we'll have a stronger economy. >> you talk about the central bank moves yesterday john williams, the head of the new york fed, made some comments that made people think, made the markets think that a 50 basis point cut is much more likely this month than 25 basis points. new york fed came out and tried to talk that back. >> yeah. i don't see the federal reserve changing behaviors that rapidly by going to 50 they're incrementalists, 25, 25, 25 >> you believe 50? i can't believe they're doing it
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at all >> while we talk about the great economic numbers coming out time after time >> but the ecb is talking about another rate cut >> the yield curve is -- 55% >> we have to do this because we no longer control our own destiny -- >> and our dollar is too strong. >> we're controlled by them, not us >> true. but 55% of all european debt is negative yield >> man >> getting back to this 82% of people saving, it's only going to hurt them more. i actually believe -- i will stick my foot out again. if the ecb is going to try to restimulate the economy in europe, they have to buy equities >> really? >> just like the bank of japan has done i don't believe -- that's pretty --you know, most would say that's terrible. i believe negative returns, negative yields harm the economy. they don't stimulate >> you are sticking your neck out again. i think when you stick your foot -- that's a mixed metaphor.
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i do love them you're sticking your neck out, if you stick your foot out, you are tripping someone or putting your foot in your mouth is not what you want to do >> he does walk in the cake. >> don't you love it -- people do the best mixed metaphors. >> i've been guilty of it. >> they're good. you did stick your neck out. you're doing it again. i like knowing what you-- why would you know anything? you're managing 6$6.8 trillion. you can say something and do it. you can say what will happen, leave today and make it happen >> i've been saying this each time i've seen you, we're at a unique position at blackrock, having passive and active risk management has given us a more holistic approach to our clients. it's evident by our flows. we had a 20% increase in our technology business.
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we are having conversations, more outcome conversations with more clients, and it's showing up with these flows. >> the other thing is that your revenue numbers are down, that's partly because fees are down explain that >> you saw derisking in the quarter. we had a lot of money going into cash average assets were 2$200 billin less as you framed the original statement, security lending was down 18% that's reflective on the fears of the economy you're seeing hedge funds derisk, so the gross positions were down. so they're not borrowing more importantly we're seeing less and less m&a activity we did have this big reduction in security lending. those are some yirs we saw >> very quickly to emphasize
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this hedge funds are derisking, other clients are derisking, you think that's the wrong move, we should not be in cash right now >> no i would not be in cash if you're going to do anything, you know, put your money in a long dated mutual fund or etf. or if you're still concerned, i would still be interested in buying a u.s. ten-year even where it is. bulgarian debt, the bulgarian ten-year is trading at 38 basis points ver versus ours at 2%. joe, what would you like to own? >> i like our full faith in credit a bit more than bulgaria. >> that's what people don't understand so so the foundation is we could see lower rates which will stimulate the economy more and it will create a positive for the mortgage market.
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then i do believe global equities will continue to do better geopolitical concerns can disrupt everything in the short run. but i still believe the fundamentals over a long cycle is higher equity and i think people are wrong in derisking as much as they have >> you've been to bulgaria i'm sure you have. >> i haven't >> that's like the only place on the map you haven't been >> there's a few other countries. >> has some nice spots >> i hear some parts are beautiful. not trying to -- >> that's why you picked on them you haven't been there >> no. i did a survey of rates, i said bulgaria at 30 -- >> i know. okay we will have more with larry in a second don't go anywhere. what else is coming up we'll talk to larry fink about how the economy looks from where he sits. as we head to break, here's a quick check of what's happening in european markets right now. mixed -- actually nothing is happening. never mind we'll be right back.
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let's get back to our conversation with blackrock ceo larry fink we promised a quick discussion on the global economy. it's better here, i guess we can summit up, mostly. >> it's a lot better here. >> except china, maybe. >> china grew at 6.2%. let's be clear, it is slow but we're all envious of that type of growth. i do believe the trend in china continues to be downward we're hearing from ceos that more and more supply chains are moving out of china right now. people are not waiting, companies are not waiting to see what the outcome is.
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>> so what does that do to china in terms of the trade negotiations >> i think long term china knows they need to find ways to stimulate more of their domestic economy. our economy and most economies have 30% from domestic and other exports. china is flipped they know if they're going to continue to grow, it's going to be domestic. so the fundamental problems with china, we believe it's just not growing as fast, is they have a huge retirement problem there. >> larry, has your view on cryptos changed at all two years ago i think you called bitcoin an index of money laundering do you remember that >> i do. another broad statement. >> so how now we have libra and bitcoin. yesterday i got into a little discussion with treasury
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secreta secretary, i mean, if you're going to launder money, i mean, bitcoin is probably -- for total money laundering, it's probably .0005 so why pick on bitcoin for the money laundering al capone never had bitcoin. i don't think of libra as a cryptocurrency and marc zuckerberg is involved. >> let's talk about the concept, though forget about who has created it and what it's trying to do you know, i was in europe this past week. i had to buy a new briefcase because mine broke there. >> you were carrying cash?
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>> all jewels. and when i was going to sign the receipt or the electronic, it asked me do i want to pay in euro or dollar and i said, okay, dollar then i looked at it. i'm still being charged at 3%, okay and when you think about all the people who send money -- they may work in one country, send money back home, they generally do that through organizations that charge 5% to 10%. there is a need, whether it's a libra or something else, to democratize the exchange of foreign currencies today with computers and electronic market -- >> there shouldn't be that. >> it should be 10 basis points, 5 basis points so i actually believe the idea around lb libra, i don't think we need to create a new
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currency, but the technology to instantaneously calibrate all the currencies, that should be done -- >> who are the people making money on that? >> the banks. >> that's progress to you, at least to get to the point where you're saying it about libra >> bitcoin is -- it has to be some form of -- >> it's a basket of currencies. >> but the crypto is keeping track of it. >> if you had this mechanism in every transaction, you could minimize a transaction cost. >> that's the whole idea, right? >> that's what the whole idea is and that's what i loved about it i don't believe we need an international currency like that there's no need. but there is a huge need to bring down the fees of the interchange. >> need or not, it's here. >> the banks have not wanted to eat their own -- but when you
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see pressure like libra, do they all get on board pretty quickly and say i'm not going to lose my market square? >> there's going to be some mechanism of what i said you don't need a libra you have computers that can calibrate euro to dollar instantaneous for a couple of basis points or a yen. >> next time come for the full hour. >> i've got to go talk to my shareholders now. >> i see the evolution you're evolving and making progress thank you. >> i'm not a ne yander thal. >> when we come back, our guest host, ceo marc lasry and ledgen tear baseball player alex rodriguez. we're going to get their thoughts on investing in space, sports, what's happening in hedge funds and much more. we'll rhtacbeig bk.
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heavy hitters come to "squawk box. legendary baseball pro turned investor alex rodriguez is our special guest host and he's not alone, hedge fund owner marc lasry will join us
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from the markets to ipos to the business of sports we will cover it all. >> plus space, the final investment frontier. >> that's one small step for man, one giant leap for mankind. >> a look at why startups are turning to the stars for profits on the 50th anniversary of the apollo mission the second hour of "squawk box" begins right now >> live from the beating heart of business, new york. this is "squawk box. >> welcome back to "squawk box" here on cnbc i'm joe kernen. >> breaking news. >> oh, it's hot outside. how hot was it how does it go that's how cold it was
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the lawyers had their hands in other people's pockets anyway, it is hot outside. u.s. equity futures -- marc, you're not a lawyer, are you >> i actually went to law school. >> you're a reformed lawyer. >> but i only practiced for a year. >> charlie munger got mad because i called him a lawyer. wait a second, you were. there's a law firm founded with your name on it. >> one out of 14,000 people, over here it's like two out of six. >> blackrock out with results this morning, earnings of $6.41 a share. that was a little short of the $5.50 that the street was expecting. revenue falling a little shy of estimates at $3.5 billion. the firm said that the decrease in revenue reflects lower base fees driven in part by lending revenues blackrock's assets under management, $6.8 trillion
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there's the $6.3 trillion reported the quarter before. larry fink was just with us and was talking about what he sees out there. he thinks that investors are being a little too cautious at this point he did talk about derisking he's seeing in his funds where people are putting more in cash he thinks that's the wrong move and that the markets are headed higher from here the stock is now indicated up about $1.86. >> for more on the markets and investing, our guest host for the next two hours, co founder and chairman marc lasry and al a-rod, alex rodriguez, ceo of a-rod corp did you look at the post today, alex >> i did not. >> let me show you >> i know what's coming. >> mariano, great big section in the center. >> they said such great things about him getting into the hall of fame. >> he's cool he was awesome and as a reds fan, i don't like the mets or the yankees, really,
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but i did look at the yankees have the best record in baseball. >> there's no slowing them down. they're as good as advertised and they're deep they have three or four guys that are hurt and they're getting better. >> we gave some pointers to derrick and i don't see any improvement at this point. >> for derek, it's going to take a little time. here's a guy that's won five championships. it's going to take time. i think after three years the jury is going to come out and say has he done a good job and five years is even more fair. >> it's good for baseball. and you, how awesome was that? this is a great year for the mba and i don't know what's going to happen to you. do you have any idea how -- >> i'm pretty sure i know what's going to happen. >> the bucks are going to do better. >> the bucks will do better. i think we'll win a championship
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this year. this is our year this year, next year i think next five years you'll see us win pretty much every championship. >> is that because you're now the governor of the team >> exactly no, i think it's just because if you take a look at it, the nba has changed radically and you see that and i think it's great for the fans and it's great for the league i think we're probably one of the only teams that's had consistency. it's the same team coming back hopefully that means a lot and i think you'll see yanis, who is mvp, going to a whole nother level as well. >> my question is would you rather invest in an nba basketball team or a major league baseball team >> that's not hard a basketball team. now, if you end up deciding you want to buy a baseball team, maybe i'll invest in it. we'll get joe to come in and we'll make him a yankee fan.
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>> i think i would rather you buy the bengals and get rid of this guy brown once and for all. seriously. the reds i'm more hopeful for. >> you're you love the reds. but if my team was that bad, i wouldn't talk about it that much >> when carlos comes on, we'll talk about everything. but for now can we talk about what you're seeing because you like the stress stuff. is there anything distressed at this point >> there's less. i think there's more in asia there's more in europe u.s., there's less but we're all sort of waiting for the economy to slow down i think whether it's this year or next year, you're seeing the slowdown that's why the fed keeps trying to lower rates so there is a nervousness out
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there. whether the economy gross at 1%, we'll end up seeing that but i think for us, you're seeing a little bit more of special situations but you keep lowering rates, you're going to prolong the recovery. >> larry fink was just here and he said that right now his clients and hedge funds are derisking and he thinks it's the wrong move he thinks the markets are headed up what do you say to that? >> i understand why he's saying that what you're seeing is just a nervousness, right so when people are nervous, they're going to slow down they're not going to buy as much i think you're not going to have a recessionary environment, because i think the economy is fine so if you're not going to have a recessionary environment, you should have equities that's why i think ultimately he's correct but if you're an investor you can't take that risk you've got to be careful and you're seeing that more and more. >> i like it when you say you
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don't see as much to do here in the united states, just because of your proclivity towards distressed debt. >> china is slowing down and you're seeing asia slow down if china was growing at 6% or 7% and now it's growing at 5%, that's a 20% reduction. >> for the region. >> for the region. so capital is tighter. so for firms like ours, we're able to lend money out in asia around 15% to 20%. so we're getting overpaid for that. >> you're like a credit card company. >> we're trying to be. >> it's a different mentality in asia with the investors. they're willing to take on higher loan factors rather than trade away equity. >> you hit it on the head. >> because i head your notes. >> is that why that's really what it is at the end of the day, here in the u.s. you don't want to pay a lot for debt, so you're willing to sort of give up equity in asia, you're willing to pay for
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more for that debt because you think it's worth two, three, four, five times so why would you pay somebody 15% or 20% the only reason you're going to do that is because you don't want to give up any equity. >> also he talked about what sen natural banks are doing. he thinks it's going to be a big boom for the market. >> we're seeing a lot of investors from new york come to our secondary markets and have become very aggressive in buying apartments but look, we think there's a great environment to buy them. they're buying cap rates and improving them we've been doing the same thing for over 20 years. and we keep it right in the middle of the fairway and don't try to complicate. we don't play in retailing or warehouse. apartments is what we do and we love the environment now, there is a lot of excitement and when we find excitement, we're sellers and when there's a lot of fear and there's a nice mix, we're
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buyers. >> you do more than real estate, don't you? >> marc and i are up to some fun things i do some fun things from my family offices and the market is so competitive there's so much liquidity, there's so much information out there and we're involved in some great businesses that are very disruptive some in media, some in health and wellness and we're up to some exciting things. >> if someone came to you and said i've got this cloud based whatever, social media with bells and whistles, would you say yeah, i'm going to throw some in there? some of these guys are made bazillions of dollars in silicon valley. >> we've made a handful of bets. we've got saunders, which is kind of a richer man's airbnb. fit form is a platform that has about 55,000 subscribers
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very interesting acorn is a company that helps families like i grew up with a single mother who had two jobs it's helped the 99 investor money over time. so we're very excited about that i think there's a space to bring acorn to actors and entertainers, because if you can save 10% of your money, you can kind of dive into players and athletes going bankrupt. you can do the same thing for entertainers the key is giving them an opportunity to invest 10% of the money. >> do you want to catch lasry? there's nothing going with him. >> there is in asia and europe he's charging 15 to 20%. >> how many years before you think you can look down on him >> he's my mentor. i'll never catch him he just keeps teaching me. besides obviously being a great dad and investor and all of that, he's been a friend and a
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mentor in my darkest times marc lasry was always supportive and helpful. he was a tough friend, but always there for me and i'll never forget that. >> well, thank you >> that's great. marc, when you hear something like this, just the idea of trying to get acorns in for athletes, would you do that for your team? >> you would i think alex is absolutely right. at the end of the day what you're trying to do is you're trying to teach people who haven't had a back ground in finance what to do with all the money they're getting. i mean, imagine if when you were 18 or 19 years old all of a sudden you're making millions of dollars. and you're out of high school and all of a sudden you're making millions of dollars it takes a while to understand what to do and one thing we always tell everybody is just leave your money in the bank. you don't need to invest right now. just save that money because you've got a short career span. alex had a great career. i mean, it's 20 years.
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but most people who are playing sports or whether you're an entertainer, you'll make a lot of money for a short period of time and then all of a sudden you go from making millions of dollars to very little money and you've got to get people used to that idea and you've got to save. and that's hard. >> and we've spoken to several dozen owners like marc lasry and others not one has said i don't like the idea if it's a viable investment. even if you take that 10% and you put it under your mattress and you don't touch it, two things, families and hang-onners are not touch it we're making a bet that you'll make better decisions at 45 than 25 and if players are going bankrupt at 50 or 60%, we can cut that in half the biggest challenge is going to be having this conversation with the union but the owners, they're all in. >> i remember at one of our
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delivering interviews, you saw a lot in oil and gas did you harvest those investments? where does that stand? did they pay off where are you on that? are you out or are you still adding to positions? >> so we should have sold everything about a year ago. what happened is sort of prices came -- when we bought they were pretty low, went back up we made a little bit of money. and then that market is absolutely repriced right now. so if you take a look at what's happening in oil and gas, i think that market is down 20% plus so even with oil being where it is today, the market is saying i don't want -- i'm going to value your company at a much lower multiple today so i think today there's quite a bit to do there. but you now have to be patient and where i would tell you the biggest opportunities in distress, is really in two places in the u.s. it's really retail and it's really oil and gas
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and those are just two industries that have gotten decimated because people have said i don't want to be there anymore. and you've just had a lot of capital move out so prices are come in quite a bit. >> are you a billionaire working on an upgrade to capitalism 2.0 for the current -- to fix all the broken things in capitalism that have caused inequality? i've never heard you talk, though i've never heard you disparage the system we have necessarily i mean, obviously around the edges. i blame government in many cases for some of the ine quities that we see >> i think at the end of the day i still think this is the greatest country in the world. look, we have issues we all have issues and i think we've got to figure out how to work on those issues.
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but i think the system that we have here has actually worked and has helped a lot of people it hasn't helped as many people as you would like. >> it never could. >> right so the question is what do we do >> when we do have these discussions, i always try to get it away from talking about the capitalist system versus socialism and just try to get what do we need to do with taxes? what do we need to do with -- once we raise more taxes, what do we do to try to narrow the inequality is it education? >> i'll tell you, i actually think it's pretty simple. >> tell me how to do it. >> what's the hardest thing everybody has? it's access to capital right? you need to be able to have capital to do something. you have access to capital, you have access, we all do but the hardest thing today, if you sort of think about it if you go to a bank to borrow money, what does a bank want it wants assets, but you don't have assets so you can't borrow.
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if today the federal government would end up saying we're going to make a loan bank and half a trillion or a trillion dollars that people can go in and borrow, this economy is 60% small businesses imagine being able to go and you want to create a business. give people the opportunity. now, we may lose a bunch and people may not -- >> there's a reason for the higher standards banks would love to loan money to small businesses and get back a better return than they're getting right now. >> i agree but at the end of the day you've got a lot of ideas and yes, there's going to be issues but if you want to get people out of where they are, you've got to let them follow that dream and be able to borrow money. and today you can't. >> that sounds so much better than the signaling of -- you're saying to jump-start or even supersize capitalism, bring capitalism to the people that are being left behind. >> if you wanted to go buy a
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burger king or you want to do a mcdonald's or a subway and you need the capital to end up buying that business, you can't do it if you don't have any assets so it's sort of -- every time you go to a bank you can't borrow money so imagine if you were able to do it, you would have all these small businesses that you would be able to do. yes, a number of them would fail but we've got issues and there's a number of things that always fail but if you want to jump-start the economy, do that lowering taxes or raising taxes on folks like me and being able to give people an extra $500 a month or $500 a year, i think it's $500 a year, that's not going to have that much of an impact what has an impact is creating jobs. >> you know john is still on today, right he's going to love all of that is john still coming in today? >> yes >> he's going to love that because that's kind of his idea, too. it's as old as -- that's the oldest expression around, you don't give a guy a fish, you
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give a guy a fishing rod a guy or a gal and instead of just redistribution, give them a way to earn it i think that's great anyway, thank you. we're going to have much more with marc and alex over the next two hours. coming up, mission in space, we'll look at why startups and investors are turn to go places other than earth for future profits, as we celebrate the 50th anniversary of neil armstrong's first steps on the moon that story is coming up next here are the futures at this hour, indicated a little bit higher today boeing is up, dow is up 41, nasdaq 20, s&p 1 and 1/3 you're wchating "squawk box" on cnbc or could it turn out differently? i wanted to help protect myself. my doctor recommended eliquis. eliquis is proven to treat and help prevent another dvt or pe blood clot...
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space age. who is driving it, what's driving it, how we're going to pay for it, that's what's coming up after the break >> time now for today's aflac trivia question. in what year was the first patent registered for a pencil with an attached eraser? aner when cnbc "squawk box" continues home owner's insurance. slime in my motorcycle. no. that's motorcycle insurance. slime everywhere? ughhh nooo, there's no insurance for that. do they help when i have bills health insurance doesn't cover? yeah! that's it! aflac! gross guys. get help with expenses health insurance doesn't cover. get to know us at
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well...if you run a business, it means a lot. for starters, we provide you with financing options for your customers. that way, you can help them buy the things they love instantly and pay over time. and that turns them into serious fans. hang on, there's more. want customer insights? we've got those, too. we use data to show you what your shoppers have already bought so we can tell you what they might consider buying next. and you can offer them the perfect products. that ceo gets it. from adding unique capabilities to your company's apps to bringing you loyalty programs, our financial and tech solutions are changing what's possible in all sorts of ways. so, how can we change what's possible for you?
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now the answer to today's aflac trivia question. in what year was the first patent registered for a pens well an attached eraser? the answer, 1858 this weekend marks 50 years since the apollo 11 moon landing when american astronaut neil armstrong took one small step for man and one giant leap for mankind. morgan brennan joins us from where it all began i was talking about the building behind you it's impossible to describe the size of that if you look at the birds flying around up at the top, they look literally like specs i think it's like the biggest building in the world or something. i mean, the pentagon is, but
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it's absolutely huge, that building it's very cool very impressive. >> it is huge, it is vast, and it is mired in history so when apollo 11 blasted off from here, it was from here, kennedy space center 50 years ago. that mission cinched america's dominance in space in the 50 years since, that's still seen as the peak of american splace flight but chad anderson, the ceo of early investment firm space angels refers to as an entrepreneurial space age. >> we've gone from a dozen privately funded companies in the world to 476 companies today. they've raised $22 billion of equity capital over that period of time. so we really have a robust market economy happening right now. >> morgan stanley estimates that the space economy could top a trillion dollars by 2040 and
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there are estimates that go even higher than that e lan musk spacex has really led the way, powering rockets that are drastically dropping down launch costs jeff baize he's which has a rocket factory down the road right here is also poised to become a major player in this sector but overall here is the tee take away, the commercial space is really forging these new innovations, companies are in large part doing it along side the government and that is perhaps -- when you look at the apollo program 50 years ago versus where we are in space in the u.s., that is perhaps the biggest change so whereas nasa historically laid out the vision, they paid contractors and then they owned the hardware outright, the agency is increasingly adopting a model in which it helps fund company spacecraft and then essentially be able to pay for the services or to lease out
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those spacecraft as and when it needs it but guys, that business model, that idea of a public private partnership, is really in focus right now because the trump administration is looking to being humans back to the moon, do so on a very aggressive timeline, and that work with commercial space is going to be key to seeing something like that actually transsfier we're going to be talking about all of this a lot more as the day goes on. >> all right this is all useless info, but i really got some good stuff here, morgan number one, it's a vab, vehicle sem blie building, but it used to be the vertical assembly building, because they actually assembled the saturn rockets vertically it's got $3,660,000 cubic meters, which is one of the largest buildings in by volume it is the largest single story building in the world. and the tallest building outside of an urban area
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and when you're there, it's just unbelievable to see the size and scope of that. >> it is. >> it's cool anyway, if you get a chance. you know, i went on that thing that you get in and it does all that and i was sick for the next three hours. seriously. and i tried to -- because my kids did it and i said i'm going to stay on this thing for a while, like riding the bull. and i did it and i almost didn't recover. anyway, thank you, morgan brennan. >> that was a nice dance. >> you saw -- were you able to see? do you remember? >> i went there when i was a kid. >> do you remember when neil walked on the moon >> yes i think we're the only ones here that remember that. >> i thought it was cool. >> i can tell you it actually happened, in case anyone is wondering. >> well, i saw it on tv, so i wasn't there. >> the thing didn't extend all the way. >> the pole.
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>> after all of that info, all you guys -- it wasn't really a dance. i don't know what it was what do we got >> i'm looking it up >> i like when they do that. >> since when -- come on, work machine. okay so the estimate was for -- >> we can put a man on the moon. >> american skplexpress coming with numbers that are better than expected. it looks like revenue came in in line $10.8 billion, just running through the couple other things. second quarter provision for losses, $861 million, global consumer services grew, came in with a net of $738 million global commercial services, and we'll take some time to dig through the rest of it it looks like stock is off by 1% even though it beat earnings expectations when we come back we'll dig
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deeper into the american express results. also we've got marc lasry and alex rodriguez, we're going to be talking about sports frp contracts to controversy loofrod to cover "squawk box" will be right back. prevagen is the number one pharmacist recommended memory support brand. you can find it in the vitamin aisle in stores everywhere. prevagen. healthier brain. better life.
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still to come, much more from our special guests, marc lasry and a-rod are both here. programming note, will the fed make an even deeper cut than expected that's certainly what the market started thinking yesterday after the new york fed president john williams made some comments and some people took off and ran the fed president eric rosen gren is going to be joining us today and we'll be grilling him about all of that. sidewalk boks will be right ckba tree. twenty-four people came together to sign an agreement that created the stock exchange. just the right elements coming together.
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let's get down to domm chu, who has been looking at some recent ipos. which ones >> we're watching a few of them. a couple of earnings to start off the day here, we are going to take a look, first of all, at shares of chewy, which are up around 3,000 shares of volume. it had its first report as an earnings company, as a public
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company yesterday after the close. the sales and its net loss were pretty much in line with expectations now, the online pets product retailer went public back on june 14. the price was $22 a share. you'll remember it went up as high as $41.44 intra-day on the first day. the post ipo was just around 31 bucks. you can see the $33.72 the last trade there. big move crowdstrike also, shares are surging here they're up about 18%, 19%, over 50,000 shares premarket right now. this is the cloud based cybersecurity company. better than expected results in its first release as a public company. the stock went public back on june 12th. $34 a share. the post ipo was nearly 80 bucks, $86.25 now. it will be a new record high and we're going to end on a recently maybe made public company. i'm not going to say initial public offering, because it was
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a direct listing this is i heart media. this is the radio station company. $16.45 is where it opened up yesterday. it had been trading over the counteranywhere between 15 and 19 bucks a share it's a pretty big move i heart media emerging from bankruptcy we'll see if the shares trade higher above the $17 price that we thought it was going to be at yesterday. >> dom, thank you very much. let's talk more about the ipo market with today's special guest, chairman and ceo marc lasry, and alex rodriguez, who is the founder and ceo of a-rod corp do either one of you ever play in ipos? >> i don't. >> i couldn't imagine you would. alex, you haven't been lured in by any of these things. >> not for me. >> what's been crazy about this is watching the market with so many of them trying to get to market now some people say that's an indication that they think is end the coming what do you say about that, marc
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>> well, if you're a private company, you want to go public right now. why? because the market keeps reaching new highs, so there's a huge amount of demand for equities so i understand why everybody wants to go public and that makes sense i think for somebody like us, really all we're going to do is just wait and sooner or later things are going to go the other way. so we're going to wait about another year or two years for whether these companies -- hopefully some of them have debt and we can buy that debt at a discount but i think for all these -- >> if you're buying that debt at a discount, it's because it's distressed debt. >> exactly so you've got to wait. >> alex, my guess is if you're looking at knit of this stuff, you're looking at it way before it comes to the ipo as an early investor >> yeah, i love the idea of buying great companies that are over a billion dollars in the fourth inning at first inning pricing. and we like to invest in things
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we understand, things that we bring in more than just our resources, but where our team and our expertise and perhaps some brand value we can be great strategic partners to young founders. >> what have you found along those lines? >> for one, we like fit plan it's interesting, fit plan and saunders both founded by a pair of canadians both very smart. if you think about where airbnb is with about $4 billion of revenue. we looked at saurnder, we just think that has the potential to be a $5 or $10 billion company and if we miss, we've still got a triple and we're good with that. >> do you think that's a company that eventually gets bought up by one of the other players in the industry >> absolutely, and i think one of them could be airbnb.
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but there's so much disruption whatever worked five years ago probably doesn't work today and is not going to work in five years. >> marc, in the meantime you're sitting back and waiting for tougher times to come along. >> i'm a big believer that there's a lot of knuckle heads out that there and sooner or later people make mistakes. >> is it part to be patient? >> it is that's why we're focused more on sort of asia and europe where there's issues one of the things we're doing here in the u.s. is we buy tax liens. so i'll buy the tax lien of where you live and it's impossible to lose money but you can buy these because you're buying it -- the tax is 1% or 2%, we'll buy it at par from the town or the city and you get paid 9% until it gets paid off but you're only going to make 8% to 10% so you've got to wait. >> you mentioned retail is another area in the united states where you think it's
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really interesting it probably is, there are great deals there, but there's a lot of risk. how do you sort through what you think survives and what doesn't? >> it's a great question, because what we've got to do is we're buying based not on the potential of that company turning around, but what the value of that real estate is. >> that's it just the land? >> it's what's the liquidation value. and if everything works, then you're going to make a bunch of money. if it doesn't work, then you'll break even or make a little money. but it's very, very different, where it was sort of five years ago you would say great, i'm buying this at a six multiple. today you can buy it at a four multiple and you have no idea if it's going to be around in five years. so what alex is talking about, the whole disruption that's happening, it's huge so i think for us on the retail side, whatyou've god to do is look at the value of what the assets are and then say i'm happy to invest there. and if the company does well,
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that's how we're going to make money. >> as a debt guy, a distressed debt guy, if you watch the global interest rate picture over the last 18 months and just go what is happening, is it confounding to you does it all make sense is it troubling to you you're so laid back about everything and then i was going to ask you, if you can respond to that, i was also going to ask you whether the u.s. is a distressed debt situation at this point at $2 trillion. >> it's not. the u.s. is fine you can borrow more money. the problem -- and larry spoke about it a little bit earlier in your show. the fact that you've got negative interest rates in europe so really what that means is if you've got no issues, you can borrow money at zero if you've got issues, you can't borrow money it sort of becomes this market of have and have-nots.
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in europe we're lending at 10% to 12% now, if somebody is borrowing when they've got no issues at zero, the only reason they're paying 10% is they've got a situation and we're coming in and we're going to have all the collateral that's there, but you're getting massively overpaid for that. >> you're doing the same thing that the banks here are doing, you're saying, where you're not going to loan to them either unless you get the collateral? >> that's exactly it. >> so would it be a good short on office space in london and asia >> yeah, because the minute rates start moving up, real estate has to go down because your cost of capital is going up but i just don't know when that's going to happen you never want to fight governments. >> or the feds. >> or the fed. you'll lose. you may ultimately win ten years from now, but the cost of that is just too high so for us, really all we're doing is we're part of that shadow banking industry. we'll lend money
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five years ago everything we did was on the public markets. today 75%, 80% is all private. so that's how it's changed i'll give you a great example. in ireland today, you used to be able to borrow from the banks at sort of 5%, 6% if you had a small business or you had real estate the ecb comes in and says you can't do that anymore to the banks because it's not a rated loan so we end up buying that business and now we loan in ireland and we make those same loans at 10% to 12%. why in because we're the only ones in that market. it's ridiculous, because who got hurt people got hurt. >> i want to go back to your idea of what you said you would do in this country to try to improve the inequality situation. we had a conversation afterwards but what you're talking about doing is actually something that would hurt you because it would take away the business that you're doing right now. >> yes >> if you actually put a bank together -- i thought you were talking about having the
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government run the bank, which is what concerned me but you have a different idea, for anybody who wasn't here a few minutes ago. >> yeah. my view is at the end of the day, if you force banks to lend or you end up saying to a bank, look, here, the federal government is going to give you $50 billion, banks usually leverage that ten times. so leverage it three times, four times and go lend that money, and the government will guarantee the looses then you've got the banks and the people who are making those loans, they'll make those loans to small businesses and those small businesses will now have an opportunity to create more and more jobs. >> and again, i just want to make a point you're talking against your own book. >> that would be negative to our business, but it's beneficial to the u.s. economy it's beneficial to people. >> just in summery, you don't think that central bankers have us on the presome huge money de
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ends badly you think that low inflation or whatever it is, that there's not a huge dislocation >> i don't think they have a choice, joe. right now if you raise rates -- >> is it okay? >> it's fine it's fine. >> you don't think the end of the world is coming? >> they're crazy it's not it's fine and we're going to be fine it's just it's hard to have a lot of growth. what you're doing is you're stimulating that growth and every time you see a problem, you start lowering rates to try to keep that going and that's why you don't have this 3% to 5% gdp. >> all right marc and alex are sticking around in fact, when we return we'll be talking about business of sports from contracts to controversy. our special guests will share their thoughts coming up at the top of the hour, kevin cramer will talk about the looming debt issue these folks don't have time to go to the post office
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wifi up there? -ahhh. sure, why not? how'd he get out?! a camera might figure it out. that was easy! glad i could help. at xfinity, we're here to make life simple. easy. awesome. so come ask, shop, discover at your xfinity store today. let's talk about the business of sports the national baseball hall of fame induction ceremony is this wen. alex rodriguez was a teammate of three of the four inductees and our next host also is dialed in, marc lasry is a co owner of the milwaukee bucks. and i know a lot about how that went off, because i know some of the other owners there, the good old west and i know the q didn't want to overpay and he said, marc, will you just do this, please
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and now how much is it worth >> it's worth more than we paid for it. >> would you sell it today for a billion dollars? >> no. >> there you go. >> it was more than just will you please do this >> we wouldn't have been able to buy the team but for west. i was a little bit cheaper and west explained to me that if we didn't do that, we wouldn't be able to own it so the position we're in now is really because of him. >> let's talk, alex -- and i don't know if you said i was allowed to bring this up or not. >> let's bring it up >> a lot of home runs, dude, right? verlander brought something up and it's kind of an interesting dynamic that mlb owns rawlings is that true they make the baseball. >> they make the baseball, they
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make gloves and bats the commissioner is doing a great job in communicating that, look, we just don't have enough data and that's how i feel, too after three years, just like the derek jeter acquisition, you say is this an anomaly or the norm some players like verlander has given up 26 home runs. the most he's ever given up is 30 we're at about the halfway point so i understand his frustration. other players like david price have gone away from the cutter and gone to the change-up that's more of a swing and miss pitch >> you think the home run derby has people -- like they think they're in a home run derby every day and they don't care with strikeouts? >> our ceo of major league baseball actually made a nice adjustment on the home run derby and put a clock and the ratings have been good the last few years. but we're in an environment just
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like business, that analytics have taken over our game, just like your game, basketball, and it's hit or miss home runs are celebrated, strikeouts, people don't frown on them. when i came up, we were embarrassed if they struck out today you can be 1-5 with strikeouts, as long as you hit a home run or a double, that's considered good. >> the ball is harder now? >> that's the consensus. some way it's harder and traveling further and further. i think if you're 0-2 as a young kid, you say choke up with the ball 0-2, they say let's swing harder so we're trying to hit more home runs there is no recourse, if you strike out no big deal i strongly disagree with that. and then if the ball is a little harder, i think the commissioner in three or four years will make it a little more par. >> rob is doing a good job, though
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and i'm not going to bring up the reds anymore, but we like our teams locally. and that's where a lot of the money comes from, right? >> it's from tv. and what's different from the nba, they have more parity so if the league makes $100 and the owners make 60 and 40 at the end of the year, it gets 50/50 and if the owners make more, they send you a check. ours is more regional, so teams like the cubs, the red sox, the yankees, dodgers, they're making big money. >> it's a totally different experience you watch guys running up and down it's just nonstop. watching good fielding, which can win games or watching -- i like the national league more because you've got to think about do i put a guy in a stu substitute runner and what's that going to mean for the next lineup, should we steal. it's so much strategy involved i think they're starting to get it over in europe, too, rather
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than crappy cricket. they should try baseball and they are do you ever see something like that happening do you see the idea of moving a team part-time over the europe did you see that >> i think commissioner manford has ideas of growing our game to mexico city. you look at montreal and you look at potentially one day cuba and london was an enormous success. we had 120,000 people come watch over two days. >> i was kidding about cricket i don't know how it works anyway it's like throw the ball anyway, thank you, marc. you'll be with us for another hour coming up, can a budget deal be reached? we're going to discuss that with budget committee member senator cramer
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a wall street power player, why blackrock ceo larry fink says people are underinvested in equities right now >> then food and mouth, the central bank leader throws the markets a curve ball on interest rates. >> and the debt ceiling dual, a scramble in washington to reach an agreement before the government hits the point of no return the final hour of "squawk box" begins right now
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>> live from the most powerful city in the world, new york, this is "squawk box. >> good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market site in time square i'm joe kernen along with becky quick. marc lasry and former major league baseball superstar alex rodriguez. the futures are up 78 points and those are some of the better levels we've seen for the day. the nasdaq is up 18 or so. and the s&p indicated up about 4. we'll take a quick look at treasuries, which have been in this change between 2 and 2.1. maybe this person -- i apologize for my cricket i was kidding. i just don't know how it works they're getting mad. the other day they said travel outside your zip code much do you know how cricket works? >> i tried to watch it for 20
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minutes. the score was like 382 to 475. i tapped out i quit. >> when i was just in london, people go crazy for it so i just don't understand maybe someone can help me out. i didn't understand bitcoin and now i do maybe it will happen with cricket. >> you'll be enlightened you will no longer be -- what were you calling larry before? here are some stories that investors are going to be talking about today. the head of the largest asset manager cease u.s. stocks moving higher even from their near record levels. blackrock larry fink joinld us earlier and said taking risk off the table is a mistake. >> people are underinvested in equities and i do believe with now the change of tone of the central bank behavior and you're starting to see corporate earnings are coming in pretty well, you know, we still are constructive on the world. >> blackrock reported earnings today. earnings per share came in a
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little weaker than expected, but assets under management for that company, $6.8 trillion at this point. blackrock shares right now are down by about 14 cents boeing, the do you component is going to be taking a $4.9 billion related to the grounding of the 737 max that cuts the pretax profit and revenue by $5.6 billion. this will produce the biggest quarterly loss in boeing's history when it reports results next week. that charge focuses only on the impact of the grounding and does not include any estimate of boeing's financial liability from the two recent 737 max crashes. still putting a number on it for wall street seems to be offering a little bit of relief so much has already been baked into the stock this morning the do you component up with a gain of $8 to $69.35. and american express, another dow component beating expectations american express says that it plans to raise its quarterly dividend to 43 kwents from 39
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cents beginning next quarter the stock now down about 45 cents. >> trez resecretary steve mnuchin appeared here on "squawk box" yesterday and tried to reassure investors that the debt ceiling in congress wouldn't threaten the government's fiscal health. >> i don't think the market should be concerned. i think that everybody is in agreement that we don't do anything that puts the u.s. government at risk in terms of our issue of defaulting, and i think that nobody wants a shutdown in any scenario so i don't think the market should be concerned and we're working hard we'll get there one way or another. >> now a senior trump administration official tells our elon musk that the white house is asking for 1.2 trillion in off sets as part of an offset the democratic says that the levels are a non-starter for the party, that this is the white house's starting point for
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negotiations talks are going to continue. joining us now with more on this latest capitol hill squirmish is dorgt dakota senator kevin cramer he serves on the budget committee. can you give us the latest, senator? i see some flashes today that things are either non-starters or maybe possibilities where are we >> sure. first of all, i hate the word non-starters i think when you use the word, it's hard to start a conversation that said, it is the beginning negotiating point. but i think if we take this in chunks, joe, $1.1 trillion is a big chunk, but we're looking for $1 $150 billion in offsets for the current negotiation the next two years in raising the caps, that's a much more doable chunk. and my understanding is that the white house now late last night provided speaker pelosi with a number of options that add up to half a trillion dollars or so. and from those options, she can pick what might be doable within
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her caucus and the house of representatives and that seems like a reasonable approach. >> is it far enough away from the election where you're not going to see some -- you won't see politics really come into this i think that maybe -- the trump administration has learned their lesson that, you know, you don't really want to mess with this most likely, especially when you want an economy strong going into the election. that makes me a little bit concerned about the other side, that maybe they wouldn't mind it a little bit if the economy slowed before the election because of the debt ceiling. do you think they're going to be more in tractable, the democrats, because of that >> first of all, i've been pretty impressed with the way speaker pelosi has negotiated with secretary in the last week or two good politics is good for all players and i think that the uncertainty that is created by chaos can splash back pretty hard on the majority in the
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house of representatives as much as it can the president. but we have to remember she's got a complicated job. when i was in the majority and i was a house member and john boehner was the speaker, these were complicated for us, too you always had to find a way to cobble together a majority and that majority may or may not be all your side. and i think this is where leaders step up and they look for that common ground and they come up with the art of the possible a victory for donald trump on this obviously would be good for his campaign, but it would also be very good for house democrats. >> i was wondering, because you said politics for both people. i said wow, this guy is new or something. but you've been around long enough to have seen some things. i hope that you're right about that and i think the american people hope that you're right this is a stupid thing to be playing politics with, and both sides are guilty of that is there going to be another --
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we haven't be using kick the can down the road for a while. we used it about the eu and trying to prevent things over there. but are we ever really going to do something that has some lasting impact so we don't do this every year or six months, whatever it is >> well, a couple of things i'll say to that. first of all, having annual budgets or in this case a biannual budget, which i think would be a good reform i think it gives everybody more breathing room and more certainty. but some of those cuts are offsets that the white house has provided to the speaker to look at, include some reforms and when you hear reforms, that sometimes just simply means kicking the can down the road. in other words, you can defer, say, for example, the budget caps for a couple of years all that does is it helps balance the books today, but it just kicks the can down the road it means that the problem exists two years from now i don't think, joe, we ever
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really solve this bigger problem of debt and deficit until we deal with the mandatory side of the ledger we're just talking about discretionary spending, which is about a third of the budget at a time when we're trying to rebuild the military that's been devastated for the last decade prior to donald trump becoming the president. so it's pretty impossible to deal with the big picture if we're going to set aside two-thirds of the budget and never deal with it i'm done that's happy to talk about it i think this is a situation where you don't say non-starter. you put everything on the table, revenue, whatever you need to do changing the edge of eligibility for the entitlement programs but it all on the table, have an adult discussion, make a commitment that we're going to get it done, and that's what i think has eluded us for a long time and i think business and markets would really welcome that kind of discussion right now. >> i think the president is still mad about the last time
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that he signed off on something and he thought he had some type of commitment for border legislation and it never came. he says he's not going to be fooled again if he decides he's not going to take whatever the democrats come up with, you said you'll call him and suggest -- will you do that will he take your call >> oh, sure. i talk to him a fair bit i try to keep my calls to a minimum. i think political capital gets squandered too easily sometimes in washington, d.c but if it's a reasonable deal, it doesn't need to be perfect. we need to find -- politics is the art of the doable. i've told the president that quite recently politics is the art of the possible and so again, your viewers, wall street, businesses on main street, individuals that are paying their bills, we all need the kind of certainty that comes
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from both sides of the aisle, both sides of the capitol and all three branches of the government working together and pulling in the same direction. that's what americans want to see and that's what investors want to see. >> i was going to ask you -- i'm crappy at geography. are you near wimilwaukee? i feel bad for north dakota. have you ever had a team do anything >> the timberwolves are our team we're more football. it's right next to minnesota minneapolis is a three-hour drive from fargo so we're twins fans and vikings fans and of course we're all eagles fans now that they have the highest paid quarter back in the history of the world. >> and you don't like the yankees, right the rest of the country just despises that. a-rod is here. >> i understand that t. i'm very honored to be on with him.
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i will tell you that as a fan, i always like dplens ex lens so even as a minnesota viking began it's hard not to like the packers. >> the yankees, they come into town, wherever they go, the yankees are coming into town all right. senator, and you said fargo just like heidi heitkamp. >> we grew up very close to one another, similar backgrounds rural north dakota, blue collar families we talk like we're in the movie. >> i love that i practice that accent anyway, senator, hope to see you again. thanks for being a guest today. >> thanks for the opportunity. >> i'm surprised you're not a yankees fan, just because you like to tick people off. >> you know when i liked the yankees? i liked the yankees in 1976. do you remember that, alex >> i was born in '75, so the
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answer is no. >> the reds won back-to-back do you remember the brew >> no. >> when we come back, what's an opportunity zone, and why a little known part of president trump's tax law is now the subject of a fierce debate and the biggest ideas in new york, leading artists and thinkers are descending on the big apple this weekend and we've got a preview of the main event. stay tedun you are watching "squawk box" right here on cnbc
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welcome back, everybody. thousands are expected to brave the heat and attend ozzie fest in new york city's central park this weekend the two-day festival features music, speakers and much more. our guest host marc lasry and alex rodriguez will also be there. cnbc is the media partier. let's welcome carlos watson. thank you for being here we played ozzie coming in. why is it called ozzie fest. >> ozzie is the name of our larger media company, but fun
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fact, our friend ozzie and sharon sued us briefly. >> did they? >> and then we decided to be friends. >> oh, they're investors now >> they're investors. >> how did ozy fest come about >> a lot of the readers of said we should get together and we started with a small festival and last year alex and marc were like this is good, it could be better let's think bigger and thankfully, the mayor and other good folks here in the city allowed us to move to the great lawn so this year it's going to be five times bigger. >> part of the deal is you match up people who i might not necessarily put together in my own head kind of putting these different flavors together. >> i've heard people describe it as ted meets coachella, and i love the idea that we're bringing in music and comedy and
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food and we're marrying it people sometimes think they're coming for john legend and they discover a young author or an up and coming singer or a young chef that's the best part. >> why did you get involved in it. >> carlos interviewed me last year and immediately afterwards i said this is a few miles from where i work every day in the bronx and this is very close to central park, maybe the most famous park in this country. carlos is a fantastic guy. we both are from miami, single mothers. i just wanted to be involved sometimes there's so much out there and every once in a while you find something that you're like i want to be a part of this it's also giving back to this community of new york and i said i want to be involved, but we have to do something for the students the 99%, we're bringing a big majority of our audience is going to come in for free.
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>> let's talk about that on the website it says we're proud to be able to make available a limited number of complimentary tickets to those who may otherwise not be able to attend due to financial hardships. who comes in >> students, teachers, veterans. we'll have 10,000 plus who will be joining us from all around the new york metro area. a lot of students who are part of projects like project destiny and others we're going to do a special brunch for them even before the festival starts. so the chef is going to make brunch for 10,000 students tomorrow morning and then rachel ray and megan rapinoe, the soccer star would be doing it on sunday morning >> marc, who are you speaking with what are you doing >> i'm going to be with jim cramer, so i get to interview him. >> have you been working on your questions? >> yeah, we chatted. i think he wants to be our new
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gm because he told me he's won his fantasy league for the last couple of years. so you sort of find out a lot about different people, sort of their interests. so it actually will be a fun time. >> and you think about young people and our students, that's the prism that i want to focus on, because the next generation, our responsibility is to pay it forward. when you think about someone coming to ozy fest, they really don't know what they want to do with their lives you get to come to the great lawn and say i could be in politics, media, a hedge fund manager, a baseball player, i can have great food. and at the end of the day you have john legend with a great concert. so to me that's the greatest block party in new york city it's going to be a great weekend. >> you picked a hot one. >> we did or we made it hotter. >> seriously, when they're talking about the real feel temperature of 100 degrees plus, what do you do >> one, kind of free water really important
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two, we're literally importing fans in from arizona and keeping misting stations and lots of sunscreen and free hats and ban dan nas and now we've created three or four tentd areas that have ac. so there will be a big opportunity. in fact, we've got the guys from cash pad, joe joe and co star coming there, so they're going to be inside our little cinema and it should be nice for people who are feeling hot. >> it's so hot, i saw a chicken lay an om let. it's so hot, i saw squirrels picking up nuts with pot holders. it's so hot, i saw two trees fighting over a dog. you've got to think about that becky, i don't know what it says that you knew that right away. i read that, and i was like, oh -- >> you didn't get that immediately? you're the guy who jokes about ppi. >> i do. anyway, it's something.
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>> you're right, over 15 years >> it's funny. for some reason today was a little bit better weather-wise than i thought so something tells me that we may get a little bit lucky, a little bit of irish luck and may get something in the 80s >> it's not going to rain. >> i agree. >> the lineup looks amazing and i can't wait to see what all of you guys are doing and i especially can't wait to see this interview carlos, thanks for coming in we'll be watching this weekend thank you. >> coming up, communication breakdown as the fed tries to strike a balance on interest rates, one of its most influential members is causing some confusion in the market about where rates are headed not where they're headed, just how quickly they're headed there. we'll explain when "squawk box" returns. [beep] you should be mad your neighbor always wants to hang out. and you should be mad your smart fridge is unnecessarily complicated.
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welcome back to "squawk box. futures are up billion 85 points now on the dow boeing one of the highlights this morning after outlining some of the reserves it's setting aside to compensate airlines for the problems with the 737 max. i haven't looked at it recent. i'll just look at it real quick. >> last time i looked it was up $8. >> it is indicated $369 after
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closing at $361. that's why the dow is up. >> when we return, the opportunity economy. we're going to bring you the story of an under the radar program. it's aimed at helping the poor but could turn out to be a give away to the rich when "squawk box" returns. key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity.
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welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. so-called opportunity zones were designed to steer investment into poor communities, but have they become a tax giveaway to the wealthy? robert frank has been looking into that. >> good morning, becky over $30 billion expected to pour into opportunity funds which have become a favorite investment of the welgty but rather than rescuing distressed neighborhoods, they're often going to luxury hotels and projects in big cities that probably would have been funded anyway if an investor sells a company or stock or asset for a profit,
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they can put the proceeds into an opportunity fund without paying a capital gains tax the fund then invests in an opportunity zone, which are supposed to be in disvangd neighborhoods. now the cape tal gains tax is deferred depending on how long the investor keeps their money in the fund. there are no reporting requirements, no dollar limits on how much you can put in, no transparency and no basic oversight. a study found that a quarter of the more an 8,000 opportunity zones in the u.s. are in areas with already high investment like new york city, miami, l.a., san francisco, and boston. opportunity fund projects currently include a luxury hyatt in one of l.a.'s fastest growing neighborhoods, luxury apartments in downtown denver, a retail and restaurant complex in booming san jose, california, and lots of projects in manhattan and new york city, including the long island city development that would have housed amazon's second headquarters. look, there are a lot of good projects out there currently on
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the slate, but the reporting requirements that were in the original legislation were mysteriously taken out right before it passed so there will be no reporting requirements on what's being built, how it's improving employment in these areas or whether it's helping housing values or the lives of people in these distressed areas. >> stay right here let's bring in two guests to talk about opportunity zones joining us is operation hopes founder, chairman and ceo john hope bryant. he's also the founder of promise homes. and heritage foundation senior policy analyst joins us from washington john, you're here on set with us obviously you want to see a lot of this economic development, but are you concerned about the way it's being monitored >> i'm always concerned about washington, d.c. but look, as long as -- first of all, the issue about some of these projects are in neighborhoods that are aspiring. if you hang around nine broke people, you'll be the tenth. so you want some of the stuff to
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ride a wave. you don't just want it compressed in what's called poor neighborhoods. you have to have an aspirational lift the problem with this legislation is only one thing, lazy public policy in manhattan you have structured everything everything is structured and cure rated as long as the policy is cure rated, meaning you've lot literacy at the bottom and financial literacy in the middle abe abraham lincoln created to teach slaves about money we just never got the memo so as long as we have the coaching -- and i met with the administration in in all fairness yesterday about this very topic so as long as they do coaching at the in the middle and financial literacy at the bottom and not just have capital at the top. otherwise it will be a rocketship on a wagon wheel. it will explode.
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it will be what heritage foundation says, a disaster. if they do what i'm saying and others are saying, it could be the best public policy move for the so-called poor in 50 years in other words, you could have a little plan, a community reinvestment act that's flexible debt then you've got public capitalism, opportunity zone funds, and then you've got the grease in the gears, which is financial literacy, which we all got from our parents without even knowing it. you grew up with it, a memo attached to your baby bib because your family was teaching financial literacy we need that in these communities. do that as a combination and you have a winning policy. >> let's talk about that because when robert first laid out the report, this idea of investing in areas that maybe aren't at the bottom of the barrel, they aren't struggling the most, not a bad idea if you think about trying to build things up. but maybe the lack of oversight is the biggest concern here.
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>> i think we all can agree that we want americans across the country in every community to benefit from the strong economy we see today but opportunity zones aren't the way to get there these zones were picked by well-connected politician to say benefit wall street and they're quite the opposite of the rest of the broad based reforms that were included in the 2017 tax reform it's lower taxes broadly available to all americans that are fuelling some of the largest wage gains for the lowest income americans, keeping the unemployment rate at historic lows it's doubling down on these types of policies, broad based reforms. this is the way to help the most americans and the americans that need it the most >> i respect his view and i'm glad he's pushing back that's the best part about america. but i actually grew up in the hood, california in south central los angeles. i'm telling you, done right, you're attracting capitol to
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neighborhoods that -- >> that's a great example because if i'm an investor and all of us in silicon valley had billions of dollars in stock that we don't want to sell or give up because there's a capital gains tax. if you have capital, are you going to put it into a luxury hotel in l.a.'s design district or in affordable housing in compton? capital is going to go where it feels like it's got the best chance of success. and maybe cometon is the right place for it to go, but from an investor point of view, what do you think the decision is going to be? >> i think the market is going to go where they see profit. you had 100 million americans that need to be rehabl gated the gdp is actually at the bottom of the pyramid. 25 years i did operation hope. i'm still doing operation hope but i decide to eat my own formula. i was tired of telling capitalist who to do and i'm tired of joe ignoring me while i'm talking. >> i'm listening
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i'm trying to figure out how to tie what marc lasry said earlier. >> you're a cool guy i've got you so what i did was two years ago i went to two hard core capitalists who are nice guys, but it was about the ploft and i decided to eat my own formula and did a fo-profit company. in these same neighborhoods, not in the major market, 28 counties, atlanta, florida, so on and so forth, and we applied the same formula in an underserved neighborhood, affordable housing, zero assets in 2017. that was $100 million in assets, double digit return, 2% delinquency rate, 95% occupancy, they're getting an incredible return forproving you don't have to be a jerk to be a capitalist, and we -- first thing we did was contract or become a member of operation hope to provide financial coaching to these residents.
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so again, not lazy public policy leaned in, did it right. same thing you're talking about, in an underserved market and it's doing just like this. i'm saying everything can do that and everybody should do that. >> look, at the end of the day, and i would agree with you, because really what you want, money is going to go where they think they're going to make money. so you're looking at it and saying should it be a hotel or housing. at the end of the day, all i'm going to do is look at where i'm going to make money. and if i think there's an opportunity, you're going to do it so i think it will have the effect, yes, you're going to end up having -- some people are going to go, look, i would rather end up being in an area where i think there's less risk. but you're going to have a lot of people that are going to look at it and say there may be more risk in cometon, but i think i'm going to get compensated for that, and i'm going to do that
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and i think you're going to have more need from what you're talking about, just because you don't need more hotels that's sort of ultimately how i would look at it. >> whether the market does well or does not do well, people who are the postal workers, walmart managers, ups drivers, they're still going to need some place to leave at $1,000, $1,500 a month. and there's not enough of that in this marketplace. and i can't tell you how many times joe and becky's friends come to me and say i want to do well and do good i want to be a good guy, too how do i make a solid investment, but still i want -- i want to have some compassion and i want to have a legacy of knowing that i helped society, too. this is an opportunity so i respectfully disagree with people saying opportunity zones is a bad idea. you don't turn away billions of dollars going into the hood. you figure out a way to make it work. >> add many, what do you say
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>> programs like this have been tried at the state level and federal level, entinternational and every time they've been tried they have not led to higher wages or more job opportunities. and often they've led to worse outcomes for the people that you're trying to help. yes, you can see investment move from one side of the line to the other, but what politicians aren't telling you is that that investment would have happened on that other side of the street rather than on the new side of the street that's privileged by washington and they certainly aren't telling you about the americans across the country that are funding the subsidy that's allowing washington to pick winning areas and losing areas the best way to support broad-based growth is with equally applied policies at the federal level and targeted local reforms at the state and local level where things like zoning reform can allow for more housing, where education choice can allow families to pick the
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best educational options for their children these are the local institutional reforms that help the most people. >> alex? >> look, we see a gap in the market where you can actually go to these neighborhoods we're buying thousands of homes every year and doing major rehab on them and there's a double bottom line. because not only are you buying these houses, you're making them better and you're giving families across the country a better life. because they want a good life as well for $1,000 or $1,200. you're making great returns and you're also making neighborhoods across america better. >> you shouldn't need a tax incentive or a tax break that costs the government $2 billion a year to do that. if there is a genuinely great return, why do you need to have a tax loop hool. >> here's the thing. yeah, you would love to have great public policy. you would love to have a lot of
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these things so what's the harm the harm is that -- there's a cost, it's $2 billion or whatever the number is but at the end of the day there's going to be a number o people that are helped so if you end up saying that capitalism is going to solve every problem, i would love that to happen. it doesn't so ultimately why not give a push it may not be the best program out there, but it ends up helping people and then from there, you can see the mistakes you've made and you can say, look, we're going to try to fix it capital coming in, you need capital. the fact of the federal government, you've said, look, there's this tax loophole and it's costs us money. i can show you 1,000 things where -- you know, that's cost us money so there's going to be mistakes. let's learn from them and then five years from now you can say here's how we should have done it >> the ripple effect of actually having jobs out there, creating -- stimulating the
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economy, creating better homes but if it costs you $2 billion and you have all this liquidity, you want to get the money from the sidelines into the u.s. market and not to asia and -- >> that's why it was created there are all these investors like him locked up in places that are desperate for capital so let's close the gap. >> thank you for joining us today. marc and alex our guest hosts are going to be with us for the rest of the fram. >> did the fed president just put his foot in his mouth when it comes to lowering interest rates? we'll explain what happened and how some market moving comments that are being walked back much more with today's guest hosts, marc lasry d sellanbaba legend a-rod stay tuned we'll be back in just a moment that's why cognizant created a unique engineering approach
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. welcome back, everybody. president trump just tweeting, because of the faulty thought process, we have going for us at the federal reserve, we pay much higher interest rates than countries that are no match for us economically. in other words, our interest costs are much higher than other countries when they should be lower. correct. well, new york fed president john williams causing some confusion over the next move on interest rates steve joins us right now with more do you want to comment on the tweet? >> you could do it either way. the reason why we have higher interest rates is because our economy is doing so much better
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than the other ones and that the interest rates reflect it. and whether or not they actually cause the growth to be higher or lower is another issue but i do want to talk about a communications -- i'll call it a trip-up and it happened in two acts yesterday it looks like another baut of perhaps tone deafness. fed president john williams takes to the podium yesterday, strongly hints the fed would cut 50 basis points at its next meeting at the end of july he says, quote, don't keep our powder dry, that is move more quickly to add monetary stimulus than you otherwise might he goes on to cite research and says the key lessons from this research hold today, and i'm emphasizing that today, and in the future take swift action when faced with adverse economic conditions markets heard the new york fed president winking, nodding and otherwise telling them that the fed would cut 50 basis points. here are the probabilities
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a 100% chance of a rate cut in july which you can divide into two pieces right now it's a 57 chance of a 45 but yesterday after these comments they shot up to 60% not too long after that, however, we get act two. the new york fed says in the comments that williams comments were academic and, quote, not about potential policy actions at the upcoming meeting. end quote. we need a frame for the face that becky just made when i made that >> when i saw that last night, i've never heard the fed come back and walk back comments. >> alex is smiling mr. lasry is smiling so let me just finish this off on the one hand, williams' comments were in line with those by fed chairman jay pole who has said an ounce of prevention is worth a pound of cure. on the other hand, williams has been a fed bank president in new york and san francisco for eight years. and at the fed almost continuously since 1994. he had to know less than two weeks before the fed meets on
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the eve of the blackout by the fed, that the market is uncertain whether it's a 25 or a 50 and this would all be interpreted as a 50. so williams continues to raise concerns about a certain tone deafness about the market. >> i thought maybe this was just a situation where -- when you're the san francisco fed president people don't pay as much attention. when you're the new york fed president, they certainly do. >> that's true, but john has been influential and important at the federal reserve for a very long time he did all the work upon which policy is based. so john was director of research in san francisco, and became san francisco fed president and i've been talking to him continuously i don't know at least a decade, maybe longer. and he's been on air continuously for a decade or maybe longer. >> would you surprised to hear these comments initially before you heard the walk back. >> i was surprised that he would make explicit commentary ahead of this meeting if he didn't want to core fast 50.
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>> that may be what he's planning on voting. >> that's true and i don't think we should let this two-act drama take is away from the focus, which is is the fed going 25 or 50, should it go at all we had a strong retail sales report and strong payroll reports. we've seen the second quarter gdp number inch up, now it's got a two handle and then the beige book on wednesday was very upbeat. the economy does not seem that bad. all of this would be preemptive. it feels a little political and now we can bring it back to the tweet that the president gave. he's been ha ranging the fed for months now to cut interest rates. maybe a little head line dependent, not data dependent. >> you think williams' comments were political caving to the president? >> i feel like the whole board has drifted to the like water flowing downstream to the
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easiest possible route, which is cutting interest rates whereas, you know, one of the reasons why there's an independent fed is they can make these unpopular decisions. >> so here's my other question if that's the case, if that's the setup, did the again, shock than anything else, i've never seen a fed bank walk it back, did they get a call from somebody in washington that -- >> i think they probably got a call and i think it is worthwhile to explain why. you hinted at this earlier the new york fed president, because of the funky way that they created this federal reserve -- >> the most important of all of the federal reserve presidencies. >> -- he's the vice chairman of the rate setting federal market committee. >> and always gets to vote. >> he always gets a vote he doesn't rotate in and out this was an attempt by wall street to maintain its power where as the 12 federal reserve bank president was away of otherwise spreading power throughout the country, always gets a vote, part of a
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triumvirate, the chairman, the vice chairman of the board and the new york fed president those are the three. him talking and saying this stuff is important. >> you know how many times we go back and forth about academic studies, me and you -- >> you and i. >> yeah. yeah you and i -- >> go back and forth. >> just doing my literary english thing. >> you know how we do that i always needle you, oh, we can't do any policies. now you just saw, we did 20 year study, we don't wave it. has nothing to do with -- >> you're raising -- i see how you make these funny comments and i come back and say these are really germane i'll tell you why. >> we should be at 50. >> williams is the guy who did the research and now he's in the policymaking business and nobody should be more willing to take this idea. >> you think it is funny, they say, he didn't really mean it, it is just academics. >> trying to come up with an answer that they can walk it back after they got a call from washington, the federal reserve.
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>> let me ask a question, why would you -- why would you end up having a rate cut when the economy is growing at 2% >> because of inflation. >> i get that. >> that's what charlie evans -- his big thing. >> i understand that the reason you end up having rate cuts is to get the economy going. and now if you're worried about inflation, if that is what you're worried about -- >> too low too low. >> that's exactly -- you're sort of stuck in this loop, and at the end of the day you only have -- if you do a 50 bit rate cut, then you only have another 1.5 to go. >> why not put the pedal to the medal and grow like china? grow at 6% >> can i answer the question, just because i can, alex, listen to all this, you're deep in the markets, tell me your reaction to this, we spend way too much time obsessing about this, i'll take that. >> for me, i'm looking at kind of ten-year, 20-year windows, so
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all the noise sometimes, you know, warren buffett tells me it is a benefit to live in omaha because i don't get 20 people whispering in my air if you worry about buying great assets for a fair price and hold them for 15 or 20 years, in the long run, that's how i think. >> in the long run, 25 or 50 basis points at the end of july doesn't amount, in the words of humphrey bogart, to a hill of beans. don't think it is that big of a mistake. >> as a buyer, it doesn't matter what happens at the micro level, if i like the asset and paying a fair price, will that change one way or another >> that said, billions will be lost and gained because of what they do at the end of july. >> steve, thank you. great to see you let's get down to the new york stock exchange. jim cramer is standing by. i know this weekend you are going to be grilled by marc lasry. he's here.
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he's going to be grilling you at the ozi fest what are you planning for jim? >> one thing jim and i talked about is should jim be our new gm because he's won his fantasy league for the last couple of years? >> yeah, look, i'm a champion and it is something i do better than stocks and i appreciate you mentioning that. stocks are good, i think i have a unique perspective on sports and i cannot be -- i was telling my wife how excited i am to talk to you, i mean, she was saying, j jim, it is going to be 100 degrees. i said what does that have to do with talking to one of the most successful business people on earth about what is going to happen next year if the democrats win? >> i know. that's the other thing we'll talk about and joe will be upset about that >> when they win >> jim -- >> alex is such a sport. you're such a sport, thank you. >> i have a question for you i have joe here whining about
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his cincinnati reds. how your phillies doing? >> we had a good game last night against the dodgers. we went with bryce harper. we gave bryce harper one of those lasry-like, you know, contracts, greek freak contract, and now we have no money for pitching i think that as you would tell me this, mark, a couple stars or one star is not enough to win the action, right? >> no, you need more. >> i can't believe i'm going to be talking to lasry. i can't believe it people will come out it is young people that will come out, alex, you are a dream. i got an interview by you for -- with portnoy and i can't wait. she said don't wear a shirt where you can see stains that's her advice. i don't give a darn. i can't wait to see you guys >> if they go 25 and 25 eventually, should they do 50 now or data dependent? >> i think 25 and 25 because that moves the stock market
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more just kidding it is not -- i don't want to get caught on that when elizabeth warren becomes president, what will be the rate, mark when elizabeth warren, two rates, a rich person rate and poor person rate >> we'll have issues >> we're going to have tier rates. we'll pay 7% interest. >> we'll see you in a couple of minutes and we'll watch this weekend too. don't miss an exclusive interview with the boston fed president eric rosengren 4:30 m.asrnimp. ete te. stay tuned we'll be right back. ched to geid saved hundreds. that's a win. but it's not the only reason i switched. geico's a company i can trust, with over 75 years of great savings and service. ♪ now that's a win-win. switch to geico. it's a win-win.
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we have been spending the morning with marc lasry and alex rodriguez and cnbc viewers will get to see more of a-rod this fall the series premiere of his primetime show "back in the game" is coming to cnbc in november that's pretty exciting what are we going to do with that >> it is great baseball has given me so much, an opportunity to go back with former athletes that have gone from rags to riches, back to rags and, you know, it took a long time for me to learn how to hit home runs, practice, a lot of discipline investing is no different. and i get to deal with some great athletes, ryan lochte, world champion, evander holyfield, and i think it will be super entertaining. >> by the way, we should say you put just as much work into the business side as you did the sports side before everybody i ever talked to says you ask questions, you're persistent, still work hard,
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still working 80 to 100 hour weeks. >> i try to keep up with this guy. >> gentlemen, thank you. >> thank you, both. >> thank you >> good to see you we're going to turn it over now to "squawk on the street." just spoke to cramer he'll be there "squawk on the street" coming up right now. ♪ ♪ everybody move your feet ♪ good friday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber at the new york stock exchange. futures look better than they have looked all week as microsoft comes through with solid earnings and hopes for a rate cut are back despite some confusion. europe is mixed. ten year, 205, the president resumes his criticism of the fed on twitter calling their thought process faulty road map, microsoft's monster quarter. cloud business u


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